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Open letter to Mark Prisk

June 26, 2012

Dear Mark Prisk

Did you know that you’re the Minister responsible for the Small Firms Impact test?  I just thought I’d ask.  Only I’ve always thought that the small firms impact test is a really good idea… that no-one knows about.

The Small Firms Impact Test (SFIT) is a mandatory part of the impact assessment process, which means it’s something that civil servants in other Government departments have to do when they’re thinking of bringing in new regulations, and that your civil servants over at BIS are supposed to check up on, to make sure they’re doing it right.  It hasn’t been specifically excluded from the TIIN process that applies for tax changes, so we infer it applies to tax changes too.  It would, after all, be daft if it didn’t, and I can’t see anyone persuading Treasury Ministers to stand up in Parliament and say “we’ve decided we don’t need to do SFIT for tax changes”, can you?

So, what is it?  It’s the idea that you should “think small first” – when you’re designing a new regulation, you should think about the impact on small businesses first.  Well, duh, right?

Yes, but there’s a methodology.  Really.  What you’re supposed to do is, early on in your thinking, get together a focus group of small business owners and managers, and ask them whether the idea you’re floating would affect them.  That way any consultation document you send out will be informed by the real concerns of real businesses – and you’re in much less danger of missing something.

Sounds simple, right?  But then how are you going to do it?  I mean, how are you going to find small business proprietors who have got the time and energy to come and talk to civil servants about something that might or might not affect them, way off in the future, when the idea is only at the early stages?  And you want them to talk to you without immediately rushing off to the press and going “sky falling in!  Government has decided to do something stupid again!”  And, to be honest, they’ve got better things to do with their day like, you know, running their business.

The problem is even worse if you’re HMRC, because what small business wants to come and talk to HMRC about how they run their business if they don’t have to?

So to do it right, to do it well, you need to invest in the process.  You need to hold the focus group outside of London most likely – awkward when you’ve centralised the policy teams in Parliament Street.  You need to hold the focus group outside of business hours, because in business hours a small business proprietor needs to be running their business!  You might find it easier to hold the meeting outside of a government building, or even hire a professional company to recruit people for you and facilitate the meeting.  And, as we all know, this all costs money – and can you imagine the headlines in the Daily Mail?  Civil servants claiming train fares to go to a function room and talk to business owners, maybe even over a cup of coffee?  For something that might not even come off?  Because of course one measure of success would be that a stupid idea got stomped on at an early stage – but you’re not going to want to claim that kind of success in the media, are you?

Well, maybe there’s another way of doing it.  Use email, or twitter?  I know your own twitter account hasn’t sent a single tweet yet, but there are lots of MPs who are happy to use the technology and maybe one of them would show you how.  But, again, you can’t get that kind of confidential early-days idea-floating discussion with someone on twitter – one “what do you think about this?” and the twitterati will eat you up if they think you’re asking something stupid.

So how DO you get the Small Firms Impact Test done?

I imagine if you ask your officials they’ll tell you it’s all working wonderfully well.  I imagine, though, that if you ask to sit in on the next SFIT focus group meeting – ANY meeting, any department – you’ll find your diary stays empty for a long, long time.  Because, to be honest?  I’m not confident anyone actually does it at all.

Which is a shame, because it’s a good idea.

Regards


And that brings me to my next consultation response, which was to the third consultation which closed on Friday, the consultation on “Simpler Income Tax for the Smallest Businesses”.  This one was written in the usual HMRC “talking to accountants and tax professionals” register rather than in the kind of language affected businesses might be able to understand.  I thought it was a wasted opportunity, and if I were Mark Prisk I’d be asking my officials to bring me the account of the SFIT meeting that led to it.

Here’s what I sent:

This is an individual response to the consultation and will also be published over the next couple of days (with commentary) on my blog, http://tiintax.com.

It is disappointing that you don’t seem to have involved small businesses in the consultation in a more imaginative and direct way.  Did you do a preliminary “small firms impact test” scoping meeting as recommended in the BIS guidance on the small firms impact test?  I suspect not, because the document itself seems over complicated and technical: aimed at accountants, not at the smaller businesses themselves.

In my view (as a new micro business) it will be unhelpful and add unnecessary complexity to offer a range of options – what a micro business wants is clear direction on what they have to do, written in a language they can understand (have you SEEN the first page on Direct.gov on Capital Allowances?  I’m a retired tax inspector and *I* couldn’t follow it!)

Simplified expenses are, according to the TIIN, going to increase receipts by 20m p.a. ie to have a negative impact on taxpayers and it isn’t really clear in the relevant chapter why that would be.  Surely it will make a difference to whether people want to go ahead with the change if they understand where the “winners and losers” will be.

Similarly there are 300m of receipts which appear to disappear from introduction of the cash basis – again, why is this?  Again, it might make a difference to the response if it was clear who would gain from the change.  Or if it’s a horribly complicated individual judgement, then you should have included in the impact assessment the costs of making these one off calculations: I suspect that if you did so there would be no clear case for change on this basis.

Impact on individuals “depends on the degree of alignment” with other measures such as universal credit – I found this to be totally unsatisfactory.  Government changes aren’t a force of nature – get on and align them!

Impact on HMRC has not been properly assessed and I couldn’t see why not?  Surely, again, this is an essential element of the cost/benefit analysis.

In summary, then, I think that the Office of Tax Simplification has identified an area where some change could be extremely valuable but that your consultation document has not taken account of the impact on small firms and as a result the case for change is not made.
Regards

5 comments

  1. Did you see the ICAEW on the profit measure for universal credit this week? Unimpressed is putting it mildly. http://www.ion.icaew.com/TaxFaculty/24846


  2. […] small firms scoping meeting in advance of the consultation document?  No Small Firms Impact Test work done yet, […]


  3. […] may remember that, on 26 June, I published an Open Letter To Mark Prisk about the small firms impact test, in which I wondered whether he actually knew that such a thing […]


  4. […] Firms Impact Test from the BIS website since Michael Fallon took over from Mark Prisk?  (Was it something I said?)  I put in an FoI request a while ago to see the minutes of the cross Whitehall Better […]


  5. […] an alternative (the Small Firms Impact Test, which again I’ve banged on about in this blog once in a while) but (a) it costs money and (b) the government abolished it in favour of a vague […]



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